B2/2005/1318 
Neutral Citation Number: [2006] EWCA Civ 518
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION) 
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(HIS HONOUR JUDGE MACKIE CBE QC)
Royal Courts of Justice 
Strand 
London, WC2 

Wednesday, 1st March 2006
 
B E F O R E:

THE PRESIDENT OF THE FAMILY DIVISION 
 
LORD JUSTICE MAY 
 
LADY JUSTICE ARDEN 
 
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GLEN COURTNEY
Respondent/Claimant
-v-
 
CORP LTD 
Appellant/Defendant 
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(Computer-Aided Transcript of the Palantype Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No:  020 7404 1400  Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
 - - - - - - -
MR N J BARD (instructed by Messrs Richards Solicitors, 5th Floor, Premier House, 112 Station Road, Edgware, Middlesex HA8 7BJ) appeared on behalf of the Respondent
MR H RAZA (instructed by Messrs Dass Solicitors, The Old Doctor's Surgery, 50 Newhall Street, Birmingham B3 3QE) appeared on behalf of the Appellant
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J U D G M E N T
1.	LADY JUSTICE ARDEN:  Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which is set out in paragraph 5 of this judgment, is a comparatively new provision dealing with the requirements for a contract for the disposition of an interest in land.  It has given rise to a considerable amount of difficulty over its short life.  In this case, the question is again whether or not the parties' contract complied with the section.  Subject to subsection (2) and to the position where the contracts are exchanged, Section 2 requires the parties to put all the terms that are expressly agreed into a single document.  
2.	In this case there was no single document.  The respondent, therefore, had to rely on Section 2(2).  The question was whether the respondent was so entitled. The judge held that the contract was enforceable.  The appellant, for whom Mr Raza appears, contends that he was wrong to reach this conclusion.  Mr Raza has made powerful submissions to the effect that the judge was wrong.  In my judgment, however, the judge was right not to accede to the points which Mr Raza makes and in my judgment I will explain why I have come to that conclusion.  
3.	Having described the question, I must now give the necessary formal details of, and the factual background to, the issues on this appeal.  The appeal is against the order of HHJ Mackie QC, dated 21st April 2005.  His Honour was sitting in the Central London Trial Centre and by his order he gave judgment for £15,000 and interest of £1,500.  The defendant in the action applied for permission to appeal and that was given by Clarke LJ, as he then was, now Sir Anthony Clarke MR, on this basis:
"The points made in paragraphs 5 to 19 of the appellant's skeleton argument in support of the application for permission seem to me to justify permission to appeal being granted. I adjourn the application on the 2 remaining grounds referred to in paragraph 20 of the skeleton for determination, if appropriate, at the hearing of the appeal."  
I would add that those remaining grounds only arise in the event that the appeal is unsuccessful.
4.	In the first part of this judgment, I will deal with the ground on which the Master of the Rolls gave permission.  Accordingly, I now turn to the factual background and I can take this from the judgment of the judge.  At the outset of his judgment, he explains that this action: 
"... is a claim by the claimant property developer, Mr Glen Courtney, for damages for breach of contract and misrepresentation against the defendant financiers who are in the business mainly of bridging finance.  The claimant says that the defendant failed to supply promised finance which the claimant needed to buy properties in Rutland and as a result he suffered loss."  
Later the judge said this: 
"The central facts are not much disputed and I draw them from the evidence of Mr Courtney and Mr Marks and from the documents.
"Mr Courtney had bought houses at Todds Terrace, Firth Park, Uppingham in 2002. An opportunity arose in 2003 for him to purchase from a company, Dralewood, connected with Mr Stapleford, an occasional associate of the claimant, the other two properties in that terrace at a price of £117,000 each.
"The deal appears to have been agreed in principle in August.  Nothing materialised for some months, apparently because the claimant was waiting for finance to be put in place.  On 1 October of that year valuations of the two houses which were nearing building completion were obtained from well-known valuers, Colleys, for mortgage purposes. These were not structural surveys but mortgage valuations addressed [to the clients]. Both parties accepted that these valuations were of the kind that are commonly reissued to a borrower on payment of a small additional fee. These valued each property at £135,000.
"There was contact between Mr Courtney and Mr Marks around the beginning of November 2003 by which time the claimant also apparently approached another organisation for finance.
"Mr Courtney told Mr Marks of this opportunity and explained how there was an opportunity to make about £75,000, because the effect of bringing the five houses together would be to increase the value of each of them by 5% or more.
"The matter moved forward and throughout this time Mr Courtney was coming under some pressure to complete the sale. Certainly at the time he spoke to Mr Marks who became aware that the matter was quite pressing and urgent and was prepared to treat things on that basis.
"The outcome of that discussion was that Mr Marks indicated that his company would be in a position to assist Mr Courtney and following that discussion Corp Ltd [that is the appellant in this appeal] issued the two letters, one for each property, dated 10 December 2003. They are headed 'Bridging Facility', in this case, 'No.1 Todd's Terrace, Uppingham, £117,000 net. With regard to your acquisition of the above property, we are pleased, subject to our formal terms and conditions, to offer you the following bridging facilities.' Terms are then set out, including that the facilities would be made available on or before 31 December 2003. 'The facility is provided against a first charge on the above properties and subject to valuation.' Each letter said 'Please sign this letter or your legal representative if you are in agreement with the above terms'. Mr Courtney signed and returned both documents.
"Before those letters were sent out, it appears that on about 1 December Mr Marks had received copies of the Colley's valuation. If the matter had proceeded he would have contacted Colley's to get confirmation from them that they stood by their valuation, once these almost complete properties were fully completed, and would have paid a fee."
5.	I can pause there because the only question for which permission to appeal has been given is whether the judge was in error in law or in fact in not holding that the contract between the parties was unenforceable by virtue of Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which I will call the 1989 Act.  I will set out Section 2(1) and (2): 
"(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
"(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document."
I need not read further from the judgment at this stage because the judge does not expressly deal with the submissions on Section 2 of the 1989 Act.  He gave his judgment at the end of the day and he gave it without having reserved it.  
6.	On this appeal, Mr Raza, in effect, mounts four points in support of his submission that the parties' contract did not comply with Section 2 of the 1989 Act.  It will have been noted that the parties' contract provided for the execution of a charge and the charge itself would involve the disposition of an interest in land and therefore the contract would have to comply with Section 2 and the parties have proceeded on basis that it would have to comply completely with Section 2, rather than simply as regards the element of the contract providing for the issue of security.  I am content to proceed on that basis also without deciding it.  Mr Raza's four points are as follows, and I am merely taking the headlines of the points: (1) his "wrong document" point; (2) his "variation point"; (3) his "valuation point"; and (4) his "security point". 
7.	I start with the document point.  Mr Raza submits that the parties' contract was in two documents.  This is factually true.  There was first the letter of 10th December 2003, to which the judge referred, and then a document headed "Facility Letter", which contained terms and conditions for the facility being offered in the letter of 10th December.  The judge explained that there were in fact two letters on 10th December, one for each property.  Mr Raza took the court to the decision of this court in Firstpost Homes v Johnson [1995] 4 All ER 355.  In that case, the alleged contract was contained in a letter and a plan but it was only the plan which the parties had both signed.  It was held that the requirements of Section 2 had not been satisfied because it was the letter which contained the contract which referred to the plan and incorporated it but it was the letter which under Section 2 had to be signed.  As my Lord the President pointed out in argument, the matter is covered by a passage from the judgment of Peter Gibson LJ at 359 H.  Peter Gibson LJ says: 
"The point is a short one and largely one of first impression, though in considering whether the two sheets of paper are one document or two for the purposes of s 2 of the 1989 Act it is important to bear in mind that the section expressly contemplates that one document may incorporate the terms of a second document by reference. It seems to me that the natural way of looking at the letter enclosing the plan, to use the significant language of the letter, is to treat the letter alone as one document and the plan as another document, the terms of which are incorporated in the letter. That incorporation comes about because of the reference in the letter to the plan as showing what are the 15.64 acres of land at the rear of Fulfen Farm."
8.	In this case, as the judge explained, the document which passed between the parties and was signed by both of them was the letter of 10th December.  That letter stated that the offer of the solicitors was "subject to our formal terms and conditions" and it was common ground at the trial before the judge that that reference to formal terms and conditions was to terms and conditions set out in the document headed with the name of Corp Ltd, and giving its address, and appearing in the form of a pro-forma letter, that which is set out at 245A to J of the appeal bundle.  So far as that document is concerned, we can see that it sets out a number of terms and conditions.  First it sets out an "Acceptance Period", namely the period within which the offer of the facility remained open.  That date is simply stated to be 2004 and after that it was taken to lapse "if not previously accepted unless we indicate otherwise in writing".  But the position is that the letter of 10th December had in fact been signed and provided for a facility to be made available on or before 31st December 2003, a matter to which I will have to return.
9.	The Facility Letter then provided that there would be security in the form of a legal charge.  It was stated to be "a Legal Charge over the property known as..." and then there is a blank, but we know from the letter of 10th December that the security was over the two properties in Todds Terrace.  The security was to be for the loan and "all other monies and liabilities owing or incurred by you under this Facility Letter".  There is then a section dealing with the date of the commencement of the loan.  The loan is to commence when the funds were transferred and that transfer was only to take place when the borrower's solicitors have advised that they were ready for the loan to commence.  There is then provision for "Repayment of the Loan"; a provision for "Early Repayment"; a provision for extension; a provision for "Interested and Other Charges"; a set of "Special Conditions", including a provision that the solicitors had to be satisfied with the security; a provision as to "Indemnity" for the lender; provisions for "Tenancies"; a clause setting out events of "Default" at some length; a provision setting out a right of the lender to withdraw the offer; a provision dealing with lapse of the offer; a provision dealing with "Refinancing"; and then a provision dealing with general matters.  I will have to come back to some of these terms later but that summary gives an idea of the scope of the Facility Letter.  
10.	It would follow from the terms of the 10th December letter, which Mr Courtney signed, that those terms and conditions would be binding upon him even if he had not seen the terms and conditions or read them and so nothing turns on the question of whether the respondent knew what these terms were or what they meant.  
11.	Moving back to the Section 2 point, I take the view that there is nothing that was expressly agreed between the parties that was not put into either the letter of 10th December or the terms and conditions referred to in it.  Mr Raza is correct in saying that the contract between the parties was contained in two documents, namely the two I have just referred to, but the letter of 10th December was the contract for the purposes of Section 2 and it is incorporated into the terms and conditions set out in the draft Facility Letter.  In those circumstances, Section 2(2) applied and the judge was not in error in not holding that the contract was invalidated by that Section.  I would draw attention to the fact that, at page 6 of his judgment, the judge had found, as was common ground, that the terms and conditions were the terms and conditions to which I have just referred.  So that point was present in his mind when he gave his judgment.
12.	I now move to what I have called the variation question.  The letter of 10th December 2003 stated. 
"The facility is made available on or before: 31st December 2003."  
Mr Raza's point is that the respondent was still seeking the advance under that letter after 31st December 2003 and therefore the parties must have varied that term.  He referred the court to the decision of this court in McCausland v Duncan Lawrie Ltd [1996] All ER 995.  In that case there was a written contract for the sale of land which in error provided for completion on a Sunday.  The parties sensibly varied the date to the previous Friday but they did so without executing a new contract which complied with Section 2(1) of the 1989 Act.  This court held that the variation was invalid.  However, it also held that the original contract, as unvaried, remained in force.
13.	In my judgment, that case was distinguishable from the present one. In the McCausland case there was an express agreement between the parties to vary a specific date.  Here there was no express agreement between the parties.  What happened, and here again I go back to the judgment starting at page four: 
"... after 10 December Mr Courtney was coming under increasing pressure to complete the deal [the deal with Mr Stapleford]. There was little sign of Mr Marks coming up with the money. Mr Courtney was undoubtedly in frequent contact with Mr Marks about the matter and communicated strongly his wish to see some progress with the financing. Corp Limited prevaricated. Sometime shortly before Christmas, Mr Courtney put two and two together as a result of his frequent telephone contract with Corp Ltd and eventually guessed that their account had been frozen in some way. When he made enquiries about this he was surprised to learn that his suspicions were well founded.
"Throughout this period Mr Marks apparently acknowledged that Corp had a temporary problem in delivering the loan.  He emphasised that the problem would be soon overcome and did not discourage Mr Courtney from continuing with his involvement with Corp Ltd and told him that there was no need to go elsewhere. What had happened was that Corp Ltd had got into difficulties as a result of a failure by debtors to repay loans and of a creditor requiring payment unexpectedly. Corp did not have available the funds provisionally committed to the transaction recorded in the 10 December letters.
Mr Courtney came under further pressure as the evidence of Mr Stapleford made clear. Under pressure upon him, Mr Courtney, as he put it, told Mr Stapleford a lie about the position, saying that the delay was due to problems with the searches rather than the lack of finance. Mr Stapleford finally lost patience and around about 20 January 2004 put the two properties back on the market. The properties did not, despite what Mr Stapleford recorded at the end of his statement, sell particularly quickly, but by about 10 February offers had been accepted for at least one of them. In short, so far as Mr Courtney was concerned, the deal had gone away because Mr Stapleford had finally lost patience and sold the properties to someone else."
14.	In my judgment, it is clear from the judge's findings that there was no express agreement to vary the term stated in the letter of 10th December.  There is no finding by the judge that there was any such agreement.  What happened was that the lender encouraged the respondent to believe that the loan would still be made even after 31st December 2003.  After all, he had been responsible for the non-provision of funds before the agreed date.  The true position was that the lender agreed to waive the term requiring the facility to be made available by 31 December 2003.  He was entitled to do this because of the terms inserted for his benefit as lender but, because there was no express agreement to vary the contract, Section 2 did not invalidate what had happened.  It did not in fact apply to that act of the lender.  Section 2 only applies to the terms which were expressly agreed between the parties.  It is only those terms which Section 2 requires to be inserted into the contract, which both parties sign.
15.	I now turn the third point, the valuation point.  The 10th December letter provided for the facility to be "subject to variation".  There have been some discussion in the court as to what that provision actually meant, whether it meant subject to approval of the valuation by Corp Ltd itself or whether it meant approval by the solicitor to Corp Ltd.  However, whatever the clause meant, there is no real doubt as to the fact that whatever had been approved was in the contract signed by the parties; it was indeed a term inserted in the 10th December 2003 letter.  In those circumstances, the valuation point cannot, in my judgment, found a good ground for saying that the parties' contract was invalidated by Section 2 of the 1989 Act.  
16.	I come then to the last of the four points, the security point.  The position is that Mr Raza submits that the terms as to security were not set out in the agreement.  There would have to have been a further document produced by the solicitors in order for the security to be given.  Here again, I would give the same answer as I gave on the last point.  The terms of the contract was that there would be a first legal charge and we find that in the letter of 10th December, read with the Facility Letter, which provides for the charge to be a legal charge.  There are set out within the Facility Letter various other terms which naturally would have gone in the security document, including, importantly, the events of default.  In my judgment, there was no need for the parties to have agreed to anything else, for there had been a binding contract for the creation of the first legal charge of the property.  Certainly, whatever they had agreed was in the terms of the documents to which I have referred, namely the letter of 10th December 2003 or the terms and conditions incorporated therein.  Therefore, in my judgment, Section 2 of the 1989 Act did not invalidate their agreement.
17.	For all those reasons, I would dismiss the grounds of appeal on Section 2.  
18.	I then turn to the question of whether this court should grant permission to appeal on the two matters left outstanding and adjourned to this court by the order of the Master of the Rolls.  The first ground is ground 3 in the notice of appeal and I will term this the "valuation - unreality" point.  I will summarise it this way.  The judge found, as I have already set out, that the valuation performed by Colleys, being the valuation addressed to Mr Courtney, was sent to Corp Ltd at the beginning of December and what Mr Marks would have done, on behalf of Corp if the matter proceeded, was to contact Colleys to get confirmation from them that they stood by the valuation and he would have paid a fee for that exercise.  What happened in the course of preparation for the trial is that a report of an expert valuer was obtained and the opinion of this expert valuer was that, as at October 2003, the true value of the properties put up as security was less than the amount proposed to be advanced under the Facility Letter.  It is also the opinion of the valuer that there would have been no additional value to be gained by acquiring the properties together.  It will be recalled from the recitation of the facts in the judge's judgment that it was the opinion of Mr Courtney that there was a marriage value in the properties and that was one of the reasons why he was keen to make the acquisition.  
19.	Mr Raza submits that this position is unreal because it is unreal to contemplate that Corp would make an advance of an amount that exceeded the value of the security and he refers to clause 12 of the Facility Letter.  Clause 12 of the Facility Letter provides that the offer contained in the Facility Letter may be withdrawn at any time prior to the advance of the loan if: 
"(a) any misrepresentation, fraud or dishonesty on the part of any of you comes to our notice;
 (b) any other matters come to our notice which in our absolute discretion we consider might effect us."
"Until such time as we confirm that we are fully satisfied that you have complied with the requirements at this Facility Letter you should not enter into any legal commitment based upon the terms of this Facility Letter."
20.	The valuation provided by Colleys did not constitute a misrepresentation or any fraud or dishonesty on the part of Mr Courtney, the borrower.  The fact that the properties were in truth worth less than the amount proposed to be advanced was a matter which no doubt would be relevant to the valuation but it was not a matter that came to their notice prior to the time when the contract should have been performed.  Accordingly, in my judgment, the later valuation could not have prevented the breach, which occurred by reason of the fact that Corp Ltd failed to provide the funds in accordance with the terms of letter of 10th December.  Therefore in, my judgment, the "valuation - unreality" point put forward by Mr Raza would not have a real prospect of success on appeal and, accordingly, I would not grant permission on that. 
21.	I then move to ground 4 of the notice of appeal, which I will again summarise as best I can.  The point being made is that the respondent himself was in breach of contract.  It is said that he made a misrepresentation and that that would have entitled Corp Ltd not to make the loan.  Mr Courtney undoubtedly was of the opinion that the properties were worth the amount of the valuation and that they would be worth more if they were acquired at the same time, in view of its marriage value.  But what Mr Raza has to say is that these matters constituted warranties by Mr Courtney.  In that connection, it is important to go to condition 15 of the Facility Letter: 
"By accepting this Facility Letter you warrant that none of the events specified in paragraph 11(c),(d) and (e) has occurred and that all of you (or being a partnership any of the partners) have not been convicted of any offence involving dishonesty of any kind. You further warrant that all information given by you in connection with this Facility Letter is true, accurate and a full disclosure of all relevant information and that we may make such enquiries to verify it as we think fit, hold on computer any information obtained and disclose details of this Facility Letter and any information relating to it or to you to such persons as we think fit." 
22.	So far as that is concerned, the first sentence does not apply.  So far as the second sentence is concerned, the information given by Mr Courtney was a statement of his opinion and that there is no suggestion that he did not hold that opinion as his opinion.  There is no finding of any dishonesty by him and so there is no breach of warranty under 15(a).
23.	So far as I can see, there is no other express provision in the Facility Letter which would entitle the lender to excuse his own non-performance of the contract.  The simple fact of the matter was that Corp Ltd could not provide the facility at the time that it had to be provided and that prevented the respondent from making and completing his contract with Mr Stapleford and that is why the transaction went off and that is why the contract with Mr Stapleford was not completed before 31st December 2003.
24.	It is said, in addition, that the offer would have lapsed because the facility was not taken up by 31st December.  But the provision for lapse is clause 13 of the Facility Letter: 
"The offer of the Loan shall lapse if you fail to comply to our complete satisfaction with the Special Conditions of this Facility within 21 days of its acceptance by you."
But as I have explained already, the lender had in fact extended the date of performance and, in any event, it is not for the vendor to rely on his own failure to produce the money as a grounds for saying that the facility must have lapsed.  The facilities would only have lapsed if there had been a non-compliance by Mr Courtney with a condition binding on him.  
25.	Accordingly, in my judgment, there is no prospect of success on appeal on an argument based on Mr Courtney being in breach of any contract between the parties.  As I have explained, the real cause of the breach was the inability of Corp Ltd to provide the monies which it had agreed to provide in the letter of 10th December.
26.	Accordingly, I would not grant permission to appeal on ground 4 and, for the reasons given above, I would therefore dismiss the adjourned application for permission to appeal as well as dismissing the appeal.
27.	LORD JUSTICE MAY:  I agree that this appeal should be dismissed and that the application for further permission on ground 3 and 4 should also be dismissed for the reasons given by my Lady Lady Justice Arden.  
28.	To my mind, the first main issue in the appeal is comparatively straightforward to state.  The issue, I think, was whether the two documents, each dated 10th December 2003, entitled "Bridging Facility", which were signed on behalf of both parties, constituted concluded written agreements.  The case that they did not constitute concluded written agreements essentially was that there were four respects and some derivative respects in which the terms of letters were insufficiently definitive or precise to be able to constitute finding concluded contracts.  There was, it is suggested, more to define and agree before this could happen.  I suggested to Mr Raza during the period that, if there was a concluded written agreement, the necessary process of reasoning to reach that conclusion would also answer the question of whether the contract complied with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.  I remain of that view.
29.	Section 2(1) of the 1989 Act provides that:
"A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document..." 
Subsection (2) says that the terms may be incorporated in a document by reference to some other document.   
30.	In my judgment, the words "subject to our terms and conditions" incorporates into the terms of the letters the terms of the document to which it is agreed they refer; that is what had been referred to as the appellant's standard Facility Letter and by this means, in this respect, there was a compliance with Section 2(2).  That, as I understand it, is Mr Raza's main point and in my judgment it fails.  These were not contracts contained in two documents, only one of which was signed.  They were contracts each contained in one document which sufficiently incorporated the formal terms and conditions.  
31.	Another point is that the letters were each expressed to be subject to valuation.  It was suggested, I think, that there is no valuation sufficient to bring certainty to the terms of the contract.  Mr Raza further suggests that, since at a much later date, the joint expert valued the properties at values less than the amount Mr Marks had advanced and less than the valuation given earlier by Colleys, there was no contract.  I agree with Lady Justice Arden that the words "subject to valuation" were a provision enabling the appellants, who were offering to provide bridging facilities, themselves to obtain a satisfactory valuation.  The existence of the contract did not depend on the existence of any such valuation.  It is not necessary to decide what the contractual position would have been if the appellant had obtained a valuation which may be regarded as unsatisfactory.  The simple fact is that they obtained no valuation.  The reality of it was that, having agreed to provide bridging finance, they were unable to do so.  The joint expert valuation went, in my judgment, to the issue of damages, not to the existence of contracts or their breach.  
32.	Points which Mr Raza makes, relying on detailed items of terms and conditions, in my judgment founder essentially because the claimant did not warrant any particular value for the properties.  He simply handed over the Colleys valuation as being their opinion.  It was open to the appellants to obtain their own valuation.  They did not do so.  
33.	Reliance on clause 12, in my judgment, founders if only because the appellants never did purport to withdraw their offers at any time when it might have been open to them effectively to do so. These seem to be the main points that were raised. On all the other points I am also in agreement with the judgment of Lady Justice Arden. 
34.	THE PRESIDENT OF THE FAMILY DIVISION:  I agree with both judgments.  
Order: Appeal dismissed. The Application for permission to appeal grounds additional to those for which permission was granted on 12th August 2005 is also dismissed. The appellant is to pay the respondent's costs of the appeal and the application for permission on the standard basis, not including mediation costs. An interim payment of £10,000 is to be paid on account of costs.